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Top-Notch Growth For A Top Shelf Credit Union

This article originally appeared on CreditUnions.com on November 26, 2012. The data below has been updated to reflect performance as of year-end 2013.

Jack Daniels isn’t just an iconic American whiskey. The distillery that produces the best-selling U.S. whiskey in the world also is home to a credit union that outperforms its asset-based and state peers in nearly every performance metric.

Jack Daniel Employees' Credit Union ($24.3M, Lynchburg, TN) ranked No. 7 for forth quarter 2013 in Callahan’s Return of the Member [ROM] Index, which provides a comprehensive scoring system of member value that looks beyond the traditional safety and soundness issues covered by NCUA’s CAMEL scoring and other regulator examinations. ROM calculation uses 5300 Call Report data to capture a holistic view of a member’s relationship with the credit union and focuses on three core functions: savings, lending, and product usage. ROM ranks credit union performance according to asset-sized peer groups.

Its 6.2% 12-month member growth trumped that of its state peers’ 2.5% and its asset-based peer group’s 0.8%. During fourth quarter 2013, it captured 36.7% of its potential member market share. By comparison, credit unions in Tennessee captured 7.9% and credit unions with $20-50 million in assets captured 4.5%. Its average share balance reached $12,151, besting credit unions in Tennessee by nearly $4,000 and credit unions with $20-50 million in assets by more than $5,600.

Although credit unions in Tennessee did post a slightly higher average loan balance — $12,608 versus Jack Daniel Employees' $11,363 — the credit union's average member relationship topped $20,000 versus $6,036 for state credit unions, $6,700 for all credit unions in the United States, and $3,725 for credit unions of a similar asset size.

As of fourth quarter, 48.9% of members had a share draft account with the credit union, 19.7% had an auto loan, 14.3% had a credit card, and 3.7% had a first mortgage. Its loan-to-share ratio of 68.8% stacked up well against its asset-based peers’ ratio of 57.0%, and its 0.18% delinquency was significantly lower than that of its asset-based peers, 1.39%, or state peers, 0.76%.

As of year-end 2013, it had only six FTEs and posted a 73.0% efficiency ratio compared to 32 FTEs and 77.9% efficiency ratio for credit unions in Tennessee and 10 FTEs and an 88.5% efficiency ratio for its asset-based peer group (note: the efficiency ratio quantifies how well a credit union is using its expenses by measuring how much the credit union has to spend in order to generate $1 of revenue; a lower value is better).

Here, Pamela Case, CEO of Jack Daniel Employees', talks about how to turn member confidence into solid performance.

In today’s environment, lots of credit unions have strong share growth but matching that with strong loan growth is challenging. How do you encourage members to take out loans?

Pamela Case: We help members on an individual basis compare our products to competitors’ products to allow them to make an informed decision. Members tell us they have been shopping around for the best deal, normally on auto loans, and we compare the information they have to our products. We compare the overall interest they will pay and the monthly payments. We also tell them to bring information back from other places they want to check or we tell them the questions to ask to compare the total picture.

Once we have all the information, we show them the comparisons and let them decide. In some cases the other option is cheaper and we tell them that. Even if they don’t use us for that transaction, in most cases they come back to us for the next one. Some will see the difference and stay with us for the convenience and trust. We started this when the auto dealers began their 0% financing years ago. Our members didn't realize that 0% included an upfront cost that, when factored into the deal, wasn’t always the best overall package.

We also promote loan products with reduced rates, cash back on our credit cards, and a quick turnaround times on loan requests.

Why do you think you’ve had such success in growing both your shares and loans?

PC: Member confidence. We know members by name, have a stable workforce, and have minimal turnover. We understand the members are our priority and we treat them as such.

How do you entice members to open a checking account?

PC: If we make the account opening process simple and member-friendly, members advertise for us. We appreciate their willingness to tell their friends and family about the services we have available.

How are you onboarding members? How do you encourage members, especially new members, to take full advantage of the credit union’s products and services?

PC: We train all of our employees to explain our services as they open accounts. We provide information about the credit union and its products and services, offer a tour of the credit union, introduce new members to employees, and ask members what financial services they enjoyed at their prior institution that they would like to continue.

Then we explain how we can fill those needs. If we see credit cards or auto loans on their credit report, then we tell them what products we have that fill that need and help them determine if what we offer will save them money or be more convenient.

Do you have a sales culture?

PC: In a small institution, every employee must take on the role of information provider to the membership. We cross-train our employees in several areas of the credit union as back-up employees. Once employees see our products help members reach their goal, a sales culture becomes contagious. Because all of our employees interact with members during account opening, teller functions, or phone calls, all our employees gain a better understanding and connection with our membership. That helps focus the sales culture on the member and not just on reaching goals. To me, that’s when a sales culture becomes valuable and operates at the best level for the members.

Do you share your performance goals with your staff or educate your staff about your performance goals to ensure everyone in the credit union is on the same page?

PC: We encourage all of our employees to participate in the determination of our strategic goals. We give all employees the strategic plan and ask for input based on what members request. Our employees have direct contact with the membership, so they are the best source for suggesting service requests and assessing the overall needs of our members. This gives our employees a direct impact on the future and direction of the credit union.

All employees also have personal career goals and performance goals tied to the credit union’s strategy. Allowing and encouraging them to participate in the overall strategic direction of the credit union helps them set those yearly and career goals for themselves, and their willingness to keep us moving forward helps with employee turnover and morale.

We hear a lot from smaller credit unions that it’s very difficult for small credit unions to compete today, but you’re showing that it can be done. What is your secret?

PC: Our secret is a stable field of membership that has pride in the credit union they have created and developed. We know who we serve and our goal is to provide the best products we can to that membership. We have remained focused on our core, and although we have grown, we have not outgrown our ability to serve with a personal connection to the membership.

What's Your ROM Score?

Callahan's Return of the Member (ROM) index is a great way
to judge your cooperative return. Want to see your ROM Score?
Callahan publishes it in three places: Search &Analyze,
CUAnalyzer, and Peer-to-Peer.